Transcript of "Market presentation March 2012"

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IMPORTANT This presentation is podcast in full and will be published on our website www.aicoafrica.comPlease use the microphone and identify yourself before askingquestions.Please note that the information provided in thesepresentations is accurate as of the date of the originalpresentation. Presentations will remain posted on this web sitefrom one to twelve months following the initial presentation,but content will not be updated to reflect new information thatmay become available after the original presentation posting. AUDITED This presentation contains forward‐looking statements, that is, GROUP RESULTSstatements related to future, not past, events. Like otherbusinesses, AICO is subject to risks and uncertainties that could for the year endedcause its actual results to differ materially from its projections 31 MARCH 2012or that could cause other forward‐looking statements to proveincorrect. Reported results should not be considered as anindication of future performance. 27 June 2012

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OVERVIEW• We are disappointed with these results Highlights below expectations due to delayed financing affected by fall in lint prices relative to high seed cotton prices• Seedco continues to perform well and long term strategy implementation is proceeding well• Olivine’s performance is improving but continuing Olivine s performance is improving but continuing losses impacted the group’s earnings ….but, we remain committed to this investment• Cottco’s performance was up 80% on the Cottco’s performance was up 80% on the previous year …but significantly behind budget due to mid‐ season fall in lint prices f ll i li t i• Interest bill is too high and need urgent correctionOperational growth strategy remains robust and on track ….. but capitalisation is a major issue

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FMCG• A poor year, losses same as last year Highlights• Business still undercapitalised Sales volume• Borrowings tenures not matching cash cycles • 11,798 tonnes• Supply chain not full due to loan • 35% down on LY repayments Sales Revenue• E i Equipment needs replacing t d l i • USD19.2 million• Money was put in last year by both • 4% higher than LY shareholders• Came too late and in bits and pieces, merely plugged the ongoing losses• Very strong need to properly recapitalize: Very strong need to properly recapitalize: Get working capital pipeline filled and free of debt Start replacing equipment from finishing Start replacing equipment from finishing end of business

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FMCG – strategic decisions taken• Product rationalization – key product range now: oils, edible fats yp g – margarine and bakers fats, soaps – toilet and laundry, small range of canned goods, jams and preserves (outsourced)• Cotton plant closed and written off new arrangement is Surface Cotton plant closed and written off, new arrangement is Surface do cotton seed and we do soyas as our soya plant is still good• Generators installed at finishing plants and warehouses so can keep going through power cuts• Working toward outsourcing transport•IImportation of soap chips t ti f hi• This is reducing the working capital cycle• Continue to reduce costs and head count Continue to reduce costs and head count• Numbers show us that the injection of working capital will restore profitability• New equipment will help us become world class which is the only way we will succeed

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COTTON• Volumes down on last year y Highlights• Market share down due to competitors paying too much for seed cotton last year• Profits up on last year but way below budget due to the rapid fall of b l b d t d t th id f ll f lint prices from early 2011• Serious cost cuts – head count Serious cost cuts head count, Revenue R logistics, procurement • USD170.9 million• Avoided counter party risk by selling • 44% up on LY p y y g p to major players such as Olam and Profit before tax Cargill • USD6.1 million US 6 • 80% higher than LY

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COTTON – strategic issues• Started some corporate farming, will grow next year p g, g y• Current instability in seed cotton marketing must be resolved; g ginners do not control world markets; first loss is best loss ;• Continuous interrogation of costs in order to be lowest cost operator• Work with big players like Olam, Cargill, Louis Dreyfuss• Maximizing use of technology: Cell phone, communication and payments GPS; field sizes, inputs distribution accurate Satellite, crop assessment and forecasting• Regional growth, Malawi, Zambia, Tanzania

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SEED• Enjoyed great growth in volumes in Highlights j y g g FY12• Profit growth good but behind volume growth due to: Price cutting in a few markets as a result of increase in stockholdings result of increase in stockholdings (being managed down)• Problems in Malawi as a result of Bingu’s confrontation with the international community• Company is in great shape:• Stock holdings Profit before tax• New factory and research farm in f d hf • USD23.5 million Zambia • In line with LY

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SEED• Research going great guns, new varieties released, “3” series g gg g , , and “8” series for Kenya Highlands• Management development programs, performance management etc.• East African expansion on track, Tanzania, Kenya, Ethiopia, Rwanda etc. h d• West Africa first steps now taken, first steps now taken first employee hired, varieties identified, tested and released. varieties identified tested and released possible partners identified and DD about to commence• Preliminary work on GMO’s being undertaken Preliminary work on GMO s being undertaken• Cotton seed business growing fast

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SEED• Expect growth to continue and possibly accelerate p g p y• New markets are a lot bigger (Strategic views changed from contiguous view to analysis of populations and demographics)• Increasing spend on Research and Marketing as Co moves to the next phase of its growth and development

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OTHER BUSINESSES• Scottco now sold Scottco now sold deal signed and minor admin details to be taken care of• Exhort still for sale many interested parties but we need to see their money not costing us a lot (security and insurance)

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OUTLOOK• We now feel that the group is correctly structured g p y• The key issue is to get the balance sheet in shape• Will be embarking on a capital raise, Cottco debt, Olivine debt g p , , and later re‐equipping Olivine

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BASIS OF PREPARATION•Accounting policies gp – Consistent with those used in prior year Group financial statements•Presentation – Financial statements are presented in US$, which is the p , Group’s functional currency•Compliance with IAS/IFRS•Compliance with IAS/IFRS – Compliant•Audit opinion – Clean, with emphasis of matter in respect of going concern issues in Olivine issues in Olivine